Stocks rise modestly as Lehman flounders

NEW YORK » Stocks ended a temperamental session moderately higher yesterday as investors bought up the stocks of energy, materials and consumer-staple companies, but remained cautious about the beleaguered financial sector.

Bank and brokerage stocks finished mostly lower after Lehman Brothers Holdings Inc. said it plans to sell a majority stake in its investment management business and spin off its troubled mortgage assets.

On Tuesday, unease about Lehman touched off a broad selloff on worries that the No. 4 U.S. securities company had few options to raise capital. The already beaten-down stock lost nearly half its value Tuesday as investors fretted the company would succumb to soured mortgage debt and other financial ills.

Bargain-seeking investors often pick over hard-hit stocks after big pullbacks, so some buying wasn't surprising. Investors bought up energy names after they tumbled Tuesday and looked to defensive areas like consumer staples.

But Lehman shares fell another 54 cents, or 6.9 percent, to close at $7.25, after plummeting 45 percent on Tuesday.

"They're trying to buy time, but it's very dangerous on Wall Street to buy time. You need to be able to do business," Axel Merk, portfolio manager at Merk Funds, said of Lehman's plans. "I don't think we're at the end of the financial problems in the markets."

The Dow Jones industrial average rose 38.19, or 0.34 percent, to 11,268.92, after dipping briefly into negative territory, rising by nearly 150 points, and then pulling back again.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 7.53, or 0.61 percent, to 1,232.04, and the Nasdaq composite index rose 18.89, or 0.85 percent, to 2,228.70.

Advancing issues outnumbered decliners by about 8 to 7 on the New York Stock Exchange, where consolidated volume came to 6.29 billion shares, down from 7.19 billion on Tuesday.

The Russell 2000 index of smaller companies rose 9.87, or 1.40 percent, to 717.16.

The Dow fell 2.4 percent Tuesday, essentially erasing big gains logged Monday, while the S&P 500 fell 3.4 percent and the Nasdaq composite index lost 2.6 percent.

Bond prices fell yesterday after a run-up Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.63 percent from 3.59 percent late Tuesday.

The dollar moved higher against most other major currencies, while gold prices fell.

Light, sweet crude fell 68 cents to settle at $102.58 per barrel on the New York Mercantile Exchange.

Washington Mutual Inc. sank 98 cents, or 30 percent, to $2.32 after credit ratings agency Standard & Poor's Ratings Services reduced its outlook on the bank and anxiety grew over its ability to stay in business.

In the energy group, Exxon Mobil Corp. rose 2.7 percent, to $75.25, while Chev-ron Corp. advanced $2.37, or 3 percent, to $81.16.